Preferential versus Multilateral Trade Liberalization and the Role of Political Economy

Halis Yildiz and Andrey Stoyanov

No 52, Working Papers from Toronto Metropolitan University, Department of Economics

Abstract: In this paper we analyze the e¤ect of the freedom to pursue preferential trade liberalization, permitted by Article XXIV of the GATT, on country?'s incentives to participate in multilateral negotiations and on feasibility of global free trade. We present a model, in which countries choose whether to participate in preferential or multilateral trade agreements under political pressures from domestic special interest groups. We show that heterogeneity in political preferences across countries plays an important role in determining the relative merits of preferential and multilateral approaches to trade liberalization. On one hand, the opportunity to liberalize preferentially may be necessary to induce countries with strong political motivations to participate in multilateral free trade negotiations. On the other hand, when countries share similar political preferences, multilateral free trade that would have been politically supported otherwise becomes unattainable if countries can pursue preferential liberalization.

Keywords: Free Trade Agreements; Multilateralism; Political Economy; Coalition-proof Nash Equilibrium (search for similar items in EconPapers)
JEL-codes: C72 F12 F13 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2015-09
New Economics Papers: this item is included in nep-cdm, nep-int and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Related works:
Journal Article: Preferential versus multilateral trade liberalization and the role of political economy (2015)
Working Paper: Preferential versus Multilateral Trade Liberalization and the Role of Political Economy (2015)
Working Paper: Preferential versus Multilateral Trade Liberalization and the Role of Political Economy (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:rye:wpaper:wp052

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